Americans have no savings, with good reason: housing, education and health care costs are out of control, wages are stagnant, and the Fed has suppressed interest rates

The American savings crisis is a time-bomb, as multiple generations hurtle toward retirement with effectively no savings, and experts are now saying that having $1 million in the bank on retirement day isn’t enough. Future generations will either have to let their parents starve or compromise their own ability to produce the next generation while caring for the previous one (this is the crisis underway in China and Japan right now).

What’s more, American savings are declining. Have Americans simply lost their moral fiber and with it the ability to control their impulses to recklessly buy 4K TVs and avocado toast?

Or are there structural impediments to savings that are glaringly obvious in the data? Starting with the elimination of defined-benefits pensions in favor of stock-market-driven 401(k)s that ask naive investors to compete head to head with high-speed-trading Wall Street titans to eke gains out of the casino (if you can’t spot the sucker at the poker table, you’re the sucker).

But then there’s the skyrocketing cost of housing, education and health-care (from 1972 to 2005 median American healthcare spending rose 74%, mortgages went up 76% and child care/college doubled). You can’t save money you’ve had to spend to shelter yourself, educate your children, and stave off early death from injury or illness.

And then there’s the stagnation of wages: nearly all income growth since 1980 has accrued to the wealthy, whereas before that, it used to accrue to the middle classes. You can’t save money you don’t have.

Finally, there’s interest rates: our grandparents bought Certificates of Deposit that paid out 11 or 12 percent over a six months or a year. Today, a five-year CD pays 0.86%. The Feds have been so terrified of inflation — and so excited by debt-fuelled GDP growth — that they’ve kept interest rates as low as 0%, and even engaged in a perverted love-affair with negative interest rates(that is, you have to pay the bank to hold onto your money!).

So here we are, sitting on our time-bomb.

The federal government can raise aggregate demand, either through direct public investment or by getting more money into consumers’ pockets through welfare state spending. But the conservative turn in American governance inaugurated by Ronald Reagan pulled way back on that. The Fed itself also went nuclear to fight inflation around 1980: It jacked interest rates into the stratosphere, causing a massive recession and a wipeout for the working class. Unions collapsed, we stopped raising the minimum wage, and we cut taxes on the wealthy. That meant a lot less money went to lower- and middle-class Americans, and a lot more went to the wealthy, where it sits uselessly in financial markets rather than being recycled into new economic activity.

All those bad policy choices combined to create the conditions for a long die-off in interest rates. As you might have noticed, those were also the conditions for stagnant income growth. Perversely, a lot of economic policymakers praise this period for its low inflation, calling it the “Great Moderation.” A better name would be the “Great Permanent Semi-Slump.” Low inflationary pressure goes hand-in-hand with low wage growth and low interest rates.

When you lay all that out, Americans’ terrible saving rate stops looking like such a mystery. In fact, it looks downright rational.

Copyright Information: This article was reprinted with permission from Boingboing.net. Please contact the author directly for republishing information.


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7 thoughts on “Americans have no savings, with good reason: housing, education and health care costs are out of control, wages are stagnant, and the Fed has suppressed interest rates

  1. As an alternative to loaning the banksters a million bucks until you retire, which you will NEVER see, you can become self sufficient and put your fake money into real assets so you have a future.

  2. I feel I need to correct a misperception. The United States is not a capitalist country. It is fascist.

    Capitalism is a system where if you make money you get to keep it, and if you lose money you live with that debt, because freedom means the freedom to fail as well as succeed and the responsibility to accept either outcome.

    Socialism or Communism is a system where if you make money it is taxed away from you to support society and if you lose money society is taxed to cover the losses so that you can start again.

    Fascism is a system where if you make money you keep it, but if you lose money society is taxed to cover the losses.

    After 6 years of TARP, bailouts, QE, etc. which system do you think the US currently operates under?

  3. Funny how a site called govt slaves has an article that goes into every reason why we’re broke except taxation by government.
    The average US family pays 50% of its income to state, local and federal tax feeders.
    Someday this will end like how Ceaucesku and Mussolini were snuffed.

  4. Yeah Wankees, you got your capitalistic paradise didnt you, hallelujah, and whines something about Venezuela and socialism, ugh……
    This, isnt an trend confined to the banana repobulic Bonkeristan, but to the entire western world, as we speak, the various right-winged Gov. is subsidizing the uber rich witch cheep labor, the youth is sent int an job marked where they will work for nothing for years under the explanation of been on an employment arrangement witch is defined as “learning to work” and the Corps explain it as they have to be sure to what they hire, hehe and that means as in Norway, the corp pays an quarter of the salary and our Gov thru the well fare system pays the rest, and stil the salary is just half of an ordinary one, all done with the approval of the Labor Dep, its called socialism for the rich, socialism is dead, what we have is an downright plundering of the peoples and our nations wealth.
    Etc, I bet there are similar scams out there in Wankeestan camouflaged as Labor training, or some semantically invented bullshit.

    The second fact is that this is making an impression in to the housing marked, and like the UssA, in Norway banks and the uber rich is buying up houses, low prices of course, since many goes bankrupt, and the repo is not going to help this people at all, but the buyer gets an house for half price, etc, etc, and this bobble was created by consent, because this people was feed money thru the cultural enrichment s whom floored our land, and this also made our social expenses sky rocket, but hey, it benefits the rich and shameless.

    etc, etc.
    Again, salary’s are an communistic invention to kill the poor billionaires, right wankers.
    Gods speed to the bottom of the pit, this will never be reversed nor done anything with, I guess it will just decline further, to an point where ordinary workers will not be able to by an ordinary house anymore, never again.
    Salary’s, witch most Americans sees and something totally wasted, an crime against humanity, isnt it so wankee capitalists, huh salary’s should be forbidden, that will of course help.

    Third fact, Norway, had all this long before we found oil, Norway since inducing well fare have never had any more economic issues, what we have had is bobbles, but not state run issues other than repairing this banking and stupid short sighted political created bobbles (like housing, creating artificial bottle necks, to rise prices and then cut the interest to nothing, hallelujah etc, etc), but now, when I have mentioned this thing above, the social expenses have of course sky rocketed, and the payments, aka austerity’s, is getting worse and worse, we pay the riches people in Norway, thru our well fare system the salary’s of much of their f…. workers.
    This, Americans, is our problem corruption and criminal MoFo that runs the system.
    No wounder the uber rich is ecstatic about the well fare system.

    Get it.
    And then comes the rapefugees, an mass, whom is sucking ever more, and what do the gov. they kick their own, the right winged kicks their own, the leftis pisses upon their own.
    That is Norway 2017.
    All run by the joojos, hallelujah, the shoa must go on.
    The butt f…. goes deep, deep, deep deep.

    peace

  5. AND Wall Street Jews are stealing every SHECKLE they can off bank floors.
    TrUMPS new tax bill IS A PIECE OF STEAMING HOT CRAP JUST FOR THE 10%.
    THE 90% WILL GET A HUGE SHAFT! BLANKFINE & DIMON WILL LOVE IT!

  6. There was an investment house commercial awhile back that featured a couple. The wife was the wise one because she wanted the investment options offered and the husband was the fool because he bought things like presumably, that cherry 1967 Mustang sitting in the background. A thing selling for 20 to 30 times its initial purchase price and totally undermining the pitch for the fancy pieces of paper being hawked.

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